New York Attorney General Eric Schneiderman’s office has opened an inquiry into the business practices of National Collegiate Student Loan Trust following reports that the company often files collection lawsuits against defaulted borrowers without proper or correct paper.
The New York Times reports that Schnedierman’s office sent subpoenas to National Collegiate and debt collector TransWorld Wednesday, seeking information on each lawsuit the company has filed against New Yorkers.
So far this year, National Collegiate and TransWorld — the company hired to collect the Trusts’ student loans — has brought more than 800 collection lawsuits against borrowers who have defaulted and failed to repay their debts. It is unclear how many of these lawsuits related to New York students.
The AG’s office says the documents it is seeking relate to National Collegiate’s ability to establish a chain of ownership for student loans.
The company currently holds more than 800,000 student loans worth about $12 billion.
When a borrower defaults on one of these loans, National Collegiate files a lawsuit compelling the debtor to pay on the loans. However, dozens of these lawsuits have been dismissed because of missing or incorrect paperwork.
When this paperwork goes missing, judges have ruled that there’s no way for National Collegiate to prove it’s the true owner of the debt, giving it the right to collect on the loans.
The missing paperwork is likely the result of the way in which loans are issued and then sold.
In National Collegiate’s case, the company holds loans that were made years ago by a plethora of banks, then bundled together and sold to investors. Over time, records on these loans can disappear. Which appears to be the case in the lawsuits being dismissed.
Looking For Answers
Schneiderman’s probe attempts to get to the bottom of this missing paperwork.
“I won’t allow a generation of New Yorkers to get victimized by the very system that was created to help them get ahead,” Schneiderman said in a written statement, noting that reports of National Collegiate’s lawsuits and shoddy record keeping is “deeply concerning.”
Donald Uderitz, the founder of Vantage Capital Group — a beneficial owner of National Collegiate’s trusts — tells the New York Times that he wasn’t surprised of Schneiderman’s probe.
Uderitz, who has been critical of National Collegiate’s lawsuits against borrowers, tells the Times that he expected other state attorneys generals will follow suit.
Consumerist has reached out to National Collegiate and TransWorld for comment on the AG’s probe. We’ll update this post when we hear back.